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2.3.1 Double Bottom Line Most MFIs deal with a double bottom line. On the one hand they try to reach financial sustainability and on the other hand they try to increase their socioeconomic impact (Simanowitz, 2003). Finding the right balance between these two goals can be difficult. One of the tools that can help a MFI to promote financial performance as well as measure social performance is the client assessment tool (Woller, 2005). This tool helps to gather information about the clients, analyze the information and act on the information. According to measurement expert Gary Woller, there are three generic approaches to client assessment (Crompton, 2007): 1. Impact assessment; 2. Market research; 3. Client monitoring. Impact assessment is the process of both proving impact and improving interventions by measuring as accurately as possible the impact of an intervention and understanding the processes of intervention and their impacts so as to improve those processes (Hulme, 2000). This has become an increasingly important aspect of development activity as agencies and particularly aid donors have sought to ensure that funds are well spent. According to Pawlak and Matul (2004) impact assessment has a bad reputation by MFIs. Market research is the process of gathering information on clients’ needs and wants, behaviours and perceptions. If carried out properly and if the data is used effectively it has the potential to strengthen financial performance (Crompton, 2007). Client monitoring is the process of tracking changes in clients’ profiles, well-being and behaviour. This will allow a MFI to monitor the socioeconomic status of their clients and consequently determine its social performance (Crompton, 2007). 2.3.2 Mission drift? The phenomenon of mission drift captures the process whereby MFIs depart from their social mission, and increasingly focus on their financial performance. This focus on financial performance may harm the potential impact and outreach of microfinance programs, diminishing the poverty alleviation potential of microfinance. At the same time, this focus may harm the dual return that foreign institutional Elmar Hoogendoorn 13 Sustainable Microfinance
investors expect to gain from the financial and social performance that MFI invested in. Both effects may occur if the balance between the financial and social performance of a MFI turns into a trade-off. The ongoing process of the commercialization of MFIs is leading to such a trade-off (Engels, 2009). In July 2008, the Financial Times warned for the commercialization of MFIs. The increasing interest of institutional investors, and the large amount of money injected into the microfinance industry, seems to enhance the for-profit motive in the industry. Muhammad Yunus, claimed; ‘when you are making profits you are moving into the mentality of the loan shark. We are trying to get that loan shark out’ (Burgis, 2008). Gokhale (2009) notes that for ambitious MFIs, maximizing profits seems to become a means to attract funding and a key objective by itself. 2.3.3 Social Performance Measurement The Microfinance Centre (MFC) for Central and Eastern Europe (CEE) and the New Independent States argues that the key to developing sustainable social performance management (SPM) systems and practices is by integrating these systems within the operational organization. This approach enables MFIs to achieve their social mission, because if there is no system to support improvement in social performance, the MFIs social mission may be lost in the drive of reaching the financial targets. Combining social and financial measures can even increase financial returns in the long run, due to a better understanding of target clients and allocating resources in a more efficient way and thereby avoiding unnecessary costs of inefficient actions. Moreover, combining these indicators will enable managers to successfully balance institutional and development impact trade-offs while striving to achieve the ‘double bottom line’ and improve overall performance (Pawlak and Matul, 2004). The role of microfinance differs from one context to another. Based on a needs assessment, each MFI aims to develop services for selected target groups. Each MFI perceives its role in a different way and wants to achieve different objectives. Given this uniqueness of MFIs, there is a need for different systems and approaches for measuring social performance. Each system needs to answer the following central questions: • Verification – How successful is the mission being fulfilled? • Improvement – What can be done to better fulfil the mission? Elmar Hoogendoorn 14 Sustainable Microfinance
Page 1 and 2: ! ! Sustainable Microfinance Balanc
Page 3 and 4: Keywords and Abstract Sustainable M
Page 5 and 6: Condensed Table of Contents ! ! Key
Page 7 and 8: 3.3 Lessons from previously develop
Page 9 and 10: List of Figures ! Figure I-1: Thesi
Page 11 and 12: List of Abbreviations BDS Business
Page 13 and 14: 1. Overview This chapter serves as
Page 15 and 16: In 2007, the Dutch Ministry of Econ
Page 17 and 18: collect information or seek specifi
Page 19 and 20: In some regions entrepreneurs are a
Page 21 and 22: • What different players in the D
Page 23: 2. Theory and Literature Review - M
Page 27 and 28: 2.4 Microfinance in (Western) Europ
Page 29 and 30: A MFI in the survival mode can bare
Page 31 and 32: The main factors that negatively af
Page 33 and 34: that are needed in order to transfo
Page 35 and 36: According to Lämmermann, et al. (2
Page 37 and 38: 2.5.6 Success of BDS Lämmermann, e
Page 39 and 40: The final conclusion relates to the
Page 41 and 42: Kaplan and international strategy c
Page 43 and 44: investments in learning will lead t
Page 45 and 46: • Derived from strategy; • Stim
Page 47 and 48: emaining drivers of the model are;
Page 49 and 50: Greatbanks and Tapp (2007) Manville
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Page 53 and 54: objectives (obligations) establishe
Page 55 and 56: Section II. Research Design The pre
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Page 59 and 60: Figure 4.1: Step model of inductive
Page 61 and 62: 4.5 Methods of Data Collection In o
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Page 65 and 66: must take into account with the rel
Page 67 and 68: Section III. Findings and Discussio
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For the model Stefano (2010) propos
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know a lot about this topic', often
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5.3 Summary Based on the empirical
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6. Discussion 6.1 Introduction This
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6.2.4. Sustainability Entrepreneur
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6.2.9. Network & Business Developme
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The discussion is ended with a fina
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• Since the development of microf
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7.2.3 The Model: ‘Equally’ Bala
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cannot be controlled by the researc
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Appendix A - Thesis Proposal Accord
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1. Abstract The Thesis Project will
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efficiency, and aggressive enforcem
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entrepreneurs, compared to the curr
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The Thesis Project has several obje
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Based on the results from the liter
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8. Table of contents Preface List o
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References Armendáriz, B. 2009, 'M
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Work program March April Week numbe
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Figure B-2 Simplified Strategy Map
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Figure B-5 Comprehensive Performanc
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Organizational Development • What
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RL start at the core; 'why do you w
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Appendix E - Social ! KH jobs creat
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Appendix F - Financial ! Liquidity
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OE through friends and family and a
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MB that has to do with you financia
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RL You can test it, by launching fo
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Appendix I - Internal Business Proc
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OE he has an advantage and should f
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Appendix L - Network ! Professional
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Appendix M - Business Development S
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Appendix N - General BSC model ! Us
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Appendix O - Relation and Link ! Eq
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Appendix P - Most Important Financi
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Appendix R - Sustainability of Micr
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Appendix S - Qredits ! KH The main
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Bibliography Affleck, A. and Mellor
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Derban, W., Binner, J. and Mullineu
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the case of the tourism industry,
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Kunc, M. (2008), 'Using systems thi
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McKinsey & Company, p. 3., Availabl
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Shrader, C.B., Mulford, C.L. and Bl
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Woodworth, W. and Woller, G. (1999)
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